ACM Report: Compensation grid losses gas distribution network

Regional gas transport networks: compensation costs

The Dutch regulator ACM (Autoriteit Consument & Markt) requested a report about the costs of grid losses for the gas distribution network. Per 1 January 2020, local gas distribution companies will have to buy the losses on their networks in the market. However, offering regulated services, the distribution companies may include the costs in their tariffs.

The role of the ACM is to calculate yearly the total income for the Dutch gas distribution companies. The ACM uses them to set the tariffs gas distribution companies may charge.

For ACM, we have made an estimation of these losses for the gas distribution companies. It includes the costs associated with having to buy these on the gas market. And in addition, an estimation of the fee to compensate the network administrator. For the full report, we refer to our report on the website of ACM (report in Dutch): ACM calculation grid losses gas distribution network

Components costs gas delivery

To calculate the total of the costs associated with gas delivery, we have looked at the following components:

• Commodity costs: related to having to buy the losses on the TTF market, while taking summer-winter spread into account
• Flexibility costs: are necessary to balance hourly intra-day variations
• Transport costs: costs incurred to buy capacity at Gasunie Transport Services (GTS), the national transport network
• Other costs, e.g. for administration, execution, mark up for profit

For the period 2016-2018, we calculated an average of 19,71 €/MWh. Using our KySim Monte Carlo price simulator, we have estimated the costs for local gas distribution companies for 2020, whilst allowing for historical price sensitivities. As a result, with a confidence of 90%, we expect that the costs will be between 15,45 €/MWh and 23,60 €/MWh.